CR 93-088 Creation Tax District 93-88
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June 8, 1993
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Council Report 93-88
CREATION OF TAX INCREMENT DISTRICT 2-7
(THERMOTECH)
Proposed Action.
staff recommends the adoption of the following motion: Approval of Council
Resolution No. 93-51, adopting the document entitled "Modification of
Redevelopment project No. 1 and Tax Increment Financing Plan No. 2-7 for Tax
Increment Financing District No. 2-7 (Thermotech Inc. Proiect)" dated June
1993.
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Thermotech Inc. is proposing to expand its existing manufacturing facility by
adding an additional 50,000 square feet of manufacturing space. This
expansion requires improvements to Nine Mile Creek. As such, construction is
presently inhibited because the property is below the floodplain elevation.
The proposed improvements will remove a majority of this property from the
flood plain, and as a result, allow the development to take place.
The action as recommended by staff details the creation of Tax Increment
District 2-7. This district is proposed to be located on the site occupied
by Thermotech, Inc. at 1202-5th street South. It would encompass only the
existing Thermotech building and the area proposed for expansion of the
Thermotech building. Tax Increment from this district is proposed to be used
to pay for the cost of improvements to Nine Mile Creek in order to facilitate
the project.
~rhe zoning & Planning
May 25, 1993, stating
existing land use and
commission reviewed and approved Resolution RZ93-11 on
that the Tax Increment plan is in compliance with the
comprehensive plan.
It is anticipated the majority of the discussion of this item will take place
at the pUblic hearing by the City Council following this HRA meeting.
Primary Issues to Consider
o What type of Tax Increment District is being recommended?
o What is the purpose of creating TIF District No. 2-7?
o What are the improvements which are proposed to be completed?
o What are the implications of creating TIF District 2-7?
o What is the impact on LGA/HACA?
supportinq Information
o
Tax Increment Plan 0
Resolution No. 93-51
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Paul T~/Ste~nman, Commun~ty Development Specialist
council Report 93-88
creation/modification of Tax Increment Finance District
Page 2
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Pr1mary Issues to Cons1der
Based on the action recommended the Council has the following issues to
consider:
o What type of Tax Increment District is being recommended?
staff is recommending creation of an Economic Development District on the
Thermotech site. The site does not meet the criteria for other types of
districts, such as redevelopment district, housing, soils condition, or
renewal/renovation districts. The maximum length of an Economic Development
District is 10 years from the date of approval, or 8 years of collected
increment, whichever is less.
o What is the purpose of creating TIF District No. 2-7?
TIF District No. 2-7 is being created to facilitate the expansion of
Thermotech Inc., which is proposing an expansion of 50,000 square feet. This
expansion will have a Market Value upon completion of approximately
$2,000,000.
In order to facilitate this expansion, the boundary of the Nine Mile Creek
.IOOd Plain in the area of the Thermotech property must be reduced. Reduction
of the flood plain area will allow Thermotech the ability to build in an area
that is otherwise unbuildable.
Tax Increments generated from the Thermotech expansion as proposed in the TIF
plan could be used to pay public costs in conjunction with improvements to
Nine Mile Creek. There is also the potential of providing Thermotech with
financial assistance to undertake improvements on their property to
facilitate the project, if determined appropriate by the city Council. The
Plan as drafted allows Tax Increments to be specifically used to pay for the
following activities up to the amount as detailed:
o
o
o
Public watershed improvements
Private developer assistance
Administration
$850,000
550,000
50,000
Relating to the creation of TIF District 2-7, the Council/HRA should be aware
of the following issues:
o A redevelopment agreement would need to be executed with
Thermotech in conjunction with the undertaking of a project.
If Thermotech did not undertake their expansion, there would
be no Tax Increment generated as staff would request that TIF
District 2-7 be decertified.
o In conjunction with this plan the city is not obligating
itself to provide Tax Increment assistance to Thermotech. A
Tax Increment application would need to be received by the
developer and subsequently approved by the HRA/Council.
council Report 93-88
Creation/modification of Tax Increment Finance District
Page 3
o project expenditures of Tax Increment dollars generated in the
district would need to be specifically approved by the
HRAfcouncil.
o What are the improvements which are proposed to be completed?
Improvements to Nine Mile Creek include installation of larger or new culvert
systems to allow increased flowage capacity and improved drainage.
o What are the implications of creating TIF District No.. 2-7?
TIF District No. 2-7 includes 2 contiguous parcels of industrial property, 1
of which is occupied by the Thermotech building at 1202 - 5th street South.
The values of these parcels will be "frozen" at their current tax capacity
value of $78,613, and the properties will continue to provide taxes to the
various taxing jurisdictions based upon this "frozen" value until decertified
or for the life of TIF District No. 2-7, which would expire in June, 2003.
Once this district is decertified, the property will then provide a value,
for taxing purposes, representative of the higher market value of the
property because of the improvements which will have been made. In 1993 this
estimated amount of new taxes due to the expansion would equal $124,300.
) What is the impact on LGA/HACA?
All TIF districts created after April, 1990, must comply with Local
Government Aids loss provision enacted by the legislature. Local Government
Aid/Homestead Agriculture Credit Aid (LGA/HACA) is received by the City on an
annual basis and becomes a revenue source to the General Fund. As a result of
the 1990 TIF legislation, the city's LGA/HACA aid is reduced annually by an
amount equal to approximately 35% of the Tax Increments received from new TIF
Districts. In the case of TIF District 2-7, LGA/HACA will be reduced by
approximately $43,500 annually until the district is decertified. This would
be approximately 2.6% of the City's annual LGA/HACA.
It is anticipated that at least a portion of this loss could be made up by
securing an annual "developer fee" to be paid by Thermotech. This is similar
to what was done with National Handicap Housing Institute with regard to the
LGA/HACA loss due to certification of TIF District 2-6.
Alternatives
The Council has the following alternatives regarding this issue:
1) Approve Council Resolution No. 93-51 as recommended by staff.
2) Continue for additional information. The implications of this
alternative would be that by delaying the creation of this
district, the City would have to comply with new regulations which
are forthcoming from the legislature relative to the creation of
Tax Increment Finance Districts. It is anticipated the new
regulations will go into effect on August 1, 1993 and will further
restrict the creation and usage of Tax Increment Finance Districts.
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CITY OF HOPKINS
Hennepin County, Minnesota
RESOLUTION NO: 93-51
RESOLUTION APPROVING MODIFICATION TO
REDEVELOPMENT PROJECT NO. 1 AND
ADOPTION OF TAX INCREMENT FINANCING PLAN FOR
TAX INCREMENT FINANCING DISTRICT NO. 2-7
(THERMOTECH INC. PROJECT)
WHEREAS, BE IT RESOLVED by the City Council ("council") of
the City of Hopkins, Minnesota ("City") as follows:
section
1. 01
1. 02
1. 03
1. 04
1. 05
1.06
1. Recitals
The City of Hopkins ("City") established Redevelopment
Project No. 1 November 1989 and was subsequently
modified in October 1992 pursuant to Minnesota Statutes
469.001 to 469.047 (HRA Act).
The Housing and Redevelopment Authority in and for the
city of Hopkins ("Authority") has approved a
modification to Redevelopment Project No. 1 and the
adoption of Tax Increment Financing Plan No. 2-7 and
further recommends to the City of Hopkins City Council
approval of said Plan Modification and Tax Increment
Financing Plan.
The City has found that it is necessary and in the
public interest to modify the Redevelopment District
Plan for the Project, and establish a new Tax Increment
Financing Plan to facilitate the Development of the
project area.
The City has caused to be prepared a document titled
Modification of Redevelopment Project No. 1 Tax
Increment Financing Plan 2-7 for Tax Increment
Financing District No. 2-7, dated June, 1993. ("Plan
Modifications") .
The Plan Modifications were, in accordance with the HRA
Act and TIF Act, referred to the Hopkins Planning
Commission, which submitted to the City its written
opinion that the Plan Modifications conform to the
general plan for the development of the city as a
whole.
Estimates of the fiscal impact regarding the TIF Plan
for TIF District No. 2-7 were provided to Independent
School District No. 270 and 278, and Hennepin County at
least 30 days before the Council's public hearing on
the TIF Plan, as required under the TIF Act.
Resolution No. 93-51
Page 2
1.07 This Council has fully reviewed the contents of the
Plan Modifications and has this date conducted a public
hearing thereon at which the views of all interested
persons were heard.
Section 2. Findings Modified Redevelopment Project No.1
2.01 It is hereby found and determined that within the
Project, there exists a condition of inadequate flood
plain control which has prevented normal development of
the land by private enterprise and has resulted in a
stagnant and unproductive condition of land that is
potentially more useful and valuable.
2.02 It is further specifically found and determined that:
(a) The land in the Project would not be made
available for development without the public
intervention and financial aid described in the
Redevelopment District Plan as modified by the Plan
Modifications;
.
(b) The plan Modifications will afford maximum
opportunity, consistent with the sound needs of the
City as a whole, for the development of the project
area by private enterprise;
(c) The Plan Modifications conform to the general
development plan of the City as set forth in the
comprehensive municipal plan.
2.03 The findings in this Section are made in compliance
with the HRA Act for the purpose of showing the City's
intent to exercise the powers granted to the City by
those Acts in order to achieve the objectives of those
Acts.
section 3. Findings; Tax Increment Financing District No. 2-7
3.01 The city finds and determines that it is necessary and
desirable for the sound and orderly redevelopment of
the Project and the City as a whole, and for the
protection and preservation of the public health,
safety, and general welfare, that the powers of the TIF
Act be exercised by the city to provide public
financial assistance to the Project.
.
3.02
The City further finds that, in its reasoned opinion,
the redevelopment proposed in the TIF Plan for TIF
District No. 2-7 could not reasonably be expected to
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3.03
3.04
3.05
3.06
Resolution No. 93-51
Page 3
occur solely through private investment within the
reasonably foreseeable future and that therefore the
use of tax increment financing is necessary.
The proposed private improvements to be financed
partially through tax increment financing are necessary
to permit the city to realize the full potential of the
Project in terms of development intensity, employment
opportunities and tax base.
The TIF Plan conforms to the general plan of
development of the city as a whole.
The TIF Plan will afford maximum opportunity,
consistent with the sound needs of the city as a whole,
for the redevelopment by private enterprise of the
Project.
The City finds that the TIF Plan is intended, and in
the city's reasoned judgement its effect will be, to
promote the public purposes and accomplish the
objectives specified in the TIF Plan.
3.07 The City finds that TIF District No. 2-7 is an economic
development TIF District within the meaning of Section
469.174 subd. 12 of the TIF Act.
3.08 The City finds that section 469.177, subd. 3 clause (a)
will be applied to fiscal disparity computations.
3.09 The City has relied upon the reports and
recommendations of its staff and consultants, as well
as the personal knowledge of members of the Council in
reaching its conclusions regarding TIF District No. 2-
7.
Section 4. Plan Modification and TIF Plan Adopted: Filing
4.01 The Plan Modifications are hereby approved and adopted.
4.02 The TIF Plan is hereby adopted and TIF District No. 2-7
is hereby established.
4.03 The City directs the City Administrator to file a copy
of the Plan MOdifications with the Minnesota
Commissioner of Revenue as required by the TIF Act and
TIF Plan.
4.04 The City Administrator is authorized and directed to
transmit a certified copy of this resolution to the
Hennepin County Auditor and to request certification of
TIF District No. 2-7.
""
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Resolution No. 93-51
Page 4
Adopted this 15th day of June, 1993.
Nelson W. Berg, Mayor
ATTEST:
James A. Genellie, City Clerk